It has chosen JP Morgan Chase, Standard Chartered and the investment banking arm of Saudi Arabia's National Commercial Bank to arrange the transaction, three sources said, speaking on condition of anonymity as the information isn't public.

STC declined to comment.

The sources said it was currently unclear if STC was looking to complete a sukuk issue in the local Saudi market, or if the sukuk would be US dollar-denominated and sold to international investors.

Shareholders of STC approved the issuance of bonds both inside and outside the kingdom at an April 2 meeting, according to a bourse statement on the following day.

Should STC decide to print a dollar trade, it is likely to draw considerable interest from investors, given the rarity of Saudi credits issuing outside the kingdom.

When Saudi Electricity Co printed a $2.5 billion offer split between 10-year and 30-year sukuk earlier this month, it attracted demand worth more than $10 billion.

An STC issue would allow the company to diversify its funding base to a much greater extent, away from the Saudi banks from which it has traditionally secured much of its financial needs.

A sukuk denominated in Saudi riyals is more likely, the sources said, as the cost of funding would be cheaper for STC since local investors have large pools of liquidity to deploy.

A number of Saudi companies have tapped the local sukuk market in recent months, including SEC, dairy firmAlmarai and construction giant Saudi Binladin Group.

STC has been drawing back from international markets in recent months to focus on its home business - a point reiterated by chairman and managing director Abdulaziz Alsugair when the operator posted a 54 percent jump in first-quarter profit on Monday on lower provisions and losses from foreign units.

It completed the sale of its Indonesian subsidiary Axis to Malaysia's Axiata Group Bhd during the first quarter.